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retirement and rrsps

Traffic on Highway 401 in Toronto (file photo)Matthew Sherwood/The Globe and Mail

Welcome to our Living in Retirement blog, where a recent retiree chronicles the ups and downs of her real-life retirement journey.

If there's one relationship in retirement I hope to maintain it's with my car.

The love affair with my car goes back a long way. When I was a teenager in Windsor Ontario, it was de rigeur to have a driver's licence so the minute I could take the driver's test, I did.

From that day on the automobile became my sanctuary. The first car I drove was my father's 1966 bottle-green Pontiac Parisienne, a boat on wheels, that I regularly packed full with high school friends for trips down to the beach at Point Pelee. But the Parisienne fulfilled other purposes: it was the one place where I could be truly alone, retreat from the rest of the world and listen to Motown hits on Windsor's storied CKLW radio station.

My father, who owned a furniture store near the Ford plant and understood how credit payments worked in favour of the retailer, appreciated the smell of new cars. Every few years without fail, he purchased a new one. For cash. His advice to me was always to buy a car with cash. Never take a car loan, he said.

To this day, I wish I could follow his sage advice, but along with most people purchasing cars in Canada today, I buy on credit. Vehicle sales have hit several new monthly highs this year, making it certain that the 2004 annual record of 1,703 million sales will be topped in 2013. In this huge country, with crumbling infrastructures and underfunded or overloaded public transportation, Canadians depend on their cars, me included.

I commute three days a week to teach in the suburbs. The fastest way to get there is by car, but after a serious car accident many years ago, I was desperately anxious about driving on the highway. It wasn't until I moved to Toronto and was forced to commute to Oakville or Brampton that I decided it was time to overcome my fears. If I was going to live downtown and work part-time, I needed to feel comfortable on the highway.

Owning and operating a car is expensive. Car companies that offer zero down and 84 months to pay are enticing to cash-strapped consumers, including retirees. The loan for my 2011 Hyundai Sonata is a substantial retirement expense. Twice a month $192 is withdrawn from my chequing account. Yet the balance owing after 32 months of payments hasn't diminished by that much. After putting zero down on the car and signing up for a five-year loan at 1.9 per cent, I owe just under $20,000 - down from the original cost of $32,700.

The credit agreement spells out that $2,048 is interest, bringing the total price of the car to $34,759. Since the term of the loan is 60 months but the amortization period is 84 months, at the end of the five years, I will still owe $10,000 for which I can arrange for yet another loan. Rather than cutting down on expenses in retirement, my car keeps them up.

If I tried to sell the car today – even if it was in perfect condition, which it isn't after a fender bender that requires expensive body work – I'd be lucky to get $14,000. According to the Canadian Black Book, the bible of car prices, if I traded my 2011 Sonata for a 2014 model, the trade in-value would be $11,000 and the loan cycle would begin all over again with me still owing $10,000 on 2011 Sonata and making payments for another 84 months on a new car.

I pay around $175 for gas and $180 for insurance each month, which is pretty standard. Yet all things considered, the Sonata is a cost-effective car to operate. Maintenance in 2013 was less than $500, including oil changes and removal and storage of seasonal tires. In today's down-sized world it's the equivalent of the Parisienne and drives like a dream. The service manager at the Hyundai dealership is a prince and never before have I received such gracious service.

I realize I shouldn't be on speaking terms with my car, but our love affair overcomes all obstacles. The automobile remains the one place on earth that I'm entirely sequestered in my own world, Sirius XM tunes on the radio for company. The sixteen-year old school girl and the 62-year old semi-retired woman aren't all that different when it comes to life's pleasures.